Bel Air Partners was founded 26 years ago. Previously, I was a Wall Street banker and responsible for the first dealership IPO. When my client asked how much blue sky the deal was worth, I looked at the horizon and had no idea what that term meant.
Things got better from there.
Over the years, we’ve been fortunate to meet many great dealers, and Bel Air is still thriving thanks to our clients and partners, including Todd Berko (201-259-6798) and Willie Beck (703-728-5844). We’ve managed over 100 sales assignments and even more dealership valuation gigs. Our clients span the gap from single points to multi-franchise groups.
We’ve come to appreciate that emotional concerns can be just as important as financial decision-making when selling a dealership. (Often, succession is one alternative, but it’s not the subject of this article.) After all, you have invested not only capital but hard work and reputation in building this asset. At a more prosaic level, perks like cars for the family, healthcare, and industry trips, to name just a few, might be missed. At times, it’s been “fun” and other times not so much.
Ultimately, being a dealer is like being a member of an exclusive club. It’s no exaggeration to say your very identity is wrapped up in your dealership. Here’s a story highlighting that thinking. A while ago, we brought an offer north of half a billion dollars blue to a very successful dealer approaching his 80th birthday. He turned it down. Not because it wasn’t a fair price. He explained that, should he sell, he’d just be another old man at his country club. Anyway, no matter what the future holds, he’ll always have enough money to put fuel in his yacht, which was, as it turns out, his headquarters. Que Sera, Sera.
Clients occasionally forbid us from contacting the most logical buyers because of some actual or perceived notion that that party has a “bad reputation.” Often, we know the truth is just the opposite. In any case, you’re not inviting a friend to a dinner party. You are making a life-changing decision. Despite how you might feel about a candidate, your professionals can formulate contracts to mitigate any personal concerns. Keep your eye on the prize.
Similarly, clients often have an emotional connection with their employees. They want their employees to be “taken care of.” They want to be assured that the new owners will keep certain key employees after the sale. Often, that becomes part of the decision on who they will sell to, and even accept a lower blue sky bid to clear their conscience. Wrong. Canny buyers often disingenuously agree to those demands, but as owners, they ultimately insert their own people. Any ensuing costs will have already been priced in the deal.
Be realistic. New owners bought your dealership, betting that, under their ownership, profitability will only improve. Once you leave, it’s now their business—period. In one memorable case, the entire sales force, managers and all, were replaced when the new owner tossed out “one price” for the traditional negotiated sale system.
A solution to the problem of “taking care of employees” was found in one memorable case. Recognizing that the new buyer was a public company and would likely change its management and operational processes, our client rewarded four or five senior employees with substantial cash bonuses upon completion of the sale. That had the added benefit of rewarding those who helped in the transition by making it worthwhile to maintain confidentiality.
As financial advisors, our job is to maximize the terms of your deal with the best buyer. That’s not to say that we aren’t mindful of the emotional and even stressful decision to sell a dealership. My next article will provide realistic guidelines for those contemplating or who have already decided to sell.
Give us a call. We’re good at keeping secrets.
Sheldon Sandler
(908) 672-0943
ssandler@belairpartners.com
